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Veteran Advisor

A Trader's Point of View

So, those of you that have been around here for a long time know that I like to pick the brain of some of my market contacts in Chicago from time-to-time. I did it again, this week. In his own words, here are the thoughts, regarding the current corn and soybean markets, of my top trader source in Chicago.

In his own words:

The corn market has a premium in it, when you look at world markets. Brazil and Argentina are undercutting the trade by 10-15 dollars a ton, equal to roughly 35 -40 cents in the futures market. 

The price run up in May pushed ethanol plants to break even or negative margins. While export trade is nill we have also seen some feeders switch to feed-wheat in Southwestern feedlots for July through October.

That said, there can be more upside to corn, if we discover a larger crop problem.  The USDA has a process and that process is not designed to be out ahead making predictions. So, we will have to wait for hard data.  

That begins on August 12 with a resurvey. And after the report, I think there is early data to be released on prevent plant in the afternoon. NASS will take over the yield survey's with empirical data samples from Sept. report through Oct., Nov and then Jan. If it suggest a tight U.S. market than corn can rally sharply if Argentina or Brazil have any issues this winter with their crops. 

Soybeans
The bean market is raising its potential lows. We can fight back to 10 dollars if you lose two bushels more on yield or some more acres. 

It will take an additional 4 million acres lower in corn acres on August resurvey and down another 3 to 5 bushels per acre for me to think above a $5.00 + market.

Keep in mind that we lose a half-billion bushel of new crop exports to Ukraine, Argentina and Brazil this year. 

I tend to believe there is still a large problem on yields and this week’s hot weather won't help. I haven't a clue on acres. I had an insurance group suggest we lost 9 million corn acres. But, that obviously was not found on the June report. So, I wander if we will lose 1/2 that on subsequent reports with prevent plant and harvest abandonment thrown in. 

I bought a slug of corn today for the fund. But, know I will have to risk August report to see daylight. Given forward weather that looks better into month-end. 

If I was somebody that was long old-crop soybeans, I would be selling the rallies above $9.00.

Remember, ASF is hurting the Chinese and world total exports will be down. "

 

Now, it's your turn to react to what the Chicago commodities trader has offered. Is he right on, way off, or well balanced?

 

Thanks,

 

Mike

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Veteran Advisor

Re: ProFarmer's Jim Wisemeyer is reporting USDA running tally shows....

https://www.profarmer.com/markets/policy/usda-internal-prevent-plant-numbers-7-8-mil-acres-corn-2-3-...

Jim Wisemeyer of ProFarmer is reporting that internal sources at USDA are saying that USDA's running tally shows 7-8 million PP corn and 2-3 million PP soybeans with more to come.

If you use the July 11 WASDE's 91.7 million & their 166 yield as a starting point then there will be 77 million A's harvested for grain and 12.8 billion production.  That's not a lot of corn.  Other commentators are saying that Ukraine etc. are currently underselling us so expect exports to decline as well as ethanol production to fall with the higher price so corn demand will decline as well.  

  On the other hand, given the extent of stand issues & late planting,  that 166 bpa is likely the high.  Knock 6-10 bpa off the yield and 12 billion isn't unreasonable.

Meanwhile,  the expectation of 79-80 M harvested acres of  soybeans isnt' unreasonable but in my opinion USDA's 48.5 bpa is way too high given the percentage of soy acres that were planted late, even late-late.  I'm think that even 45 bpa is likely too high, especially if we happen to get a dry spell during seed fill.

The WASDE has 2020 carryout at 795 M bushel but it wouldn't take much to whittle a couple-three-four hundred bushel that but given that we still aren't selling anything much to China there's not much to push the price.

   

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Veteran Contributor

Re: ProFarmer's Jim Wisemeyer is reporting USDA running tally shows....

corn sub 12 and beans 40 BU at best

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Veteran Advisor

Re: A question for you to ask someone who's has....

If you please, a  question for you to ask someone who's better positioned to know, how have exports of soybeans from Brazil to China been going?  Back in April, it was reported that they were very strong which suggested that even if the Chinese weren't feeding as many pigs they  were probably compensating with increased poultry production.

I'm not sure the ASF argument is valid.  It would be nice to know how those soybean sales are running more recently. 

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Senior Contributor

Re: A question for you to ask someone who's has....

Tough to hold a rally when rain is running across IA during the session. Does look like some of the drier part in the SE got better rains than expected.

I've been through this sort of chinese water torture before. All puns intended.

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